Zalando sees new revenue potential in external shops

Zalando is expanding its product range with items from other online stores, starting with Westwing. An AI shopping agent will eventually place orders on participating external websites, without customers having to leave the Zalando app. The German company aims to generate revenue from Zalando Extended in two ways.

Zalando is taking a major step towards broadening its offering by bringing products onto its platform that it does not sell itself. The plans were announced this week alongside the publication of its quarterly results.

Growing importance of third-party sellers

Zalando has been working with external sellers for fifteen years. They now account for more than a third of Zalando Group’s B2C gross merchandise volume (GMV). Their share has risen to 33.6 percent, up from 30.7 percent a year earlier. Third-party GMV grew by 18 percent in the past quarter, according to the figures, while the group’s first-party retail business grew by just 3 percent.

Partners account for over a third of Zalando’s B2C GMV

Sales from the acquired About You business are included in these figures. Its marketplace now has more than 1,000 third-party sellers. The current number of sellers on Zalando’s own marketplace is unclear.

Zalando Extended

Unlike Zalando’s existing Partner Program, sellers participating in Zalando Extended do not sell their products directly on the platform, but through their own online stores. Zalando makes these products discoverable in its app, as it already does with Westwing, and currently redirects customers to the retailer to complete their purchase. From 2027, an AI agent is expected to handle the transaction without customers having to leave the app.

‘An ever-growing range of products’

Zalando’s ambitions are considerable, as illustrated by a passage in its earnings press release about Zalando Extended: “Starting with complex categories such as bulky home goods, it will, over time, open up an ever-growing range of products from shops across the internet, all in the secure environment of the Zalando app.” According to the company, the new service offers “significant new growth opportunities for the years ahead”. Its product range could become much broader than it is today.

Starting point for fashion shopping

Zalando hopes to strengthen its position as a starting point for fashion shopping at a time of declining gross margins. “Partner shops benefit too”, Zalando writes. “Because the AI agent does the work, they reach Zalando’s customers and gain new sales without complex technical integration or changes to their logistics. In addition, they will be able to advertise their products on Zalando through its retail media business, creating an additional revenue stream for Zalando.”

Zalando Extended eyes commissions and ad revenue

In addition to retail media revenue, Zalando also plans to earn commissions on purchases made at external online stores, CFO Anna Dimitrova explained during an earnings call. The commission rates have not yet been disclosed. The same applies to the participation requirements, technical integration and international rollout of Zalando Extended. Zalando currently operates its platform in 28 countries, with Bulgaria being the latest addition.

B2B as a growth driver

Zalando Group saw its revenue increase by 5.1 percent to 3.17 billion euros in the third quarter. Adjusted operating profit (EBIT) rose by 10.6 percent to 107 million euros. A substantial part of this profit, 42 million euros, came from the strongly performing B2B division. The group’s B2B revenue grew by 27.9 percent to 354 million euros.